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Entering the Chinese market: more challenges, more rewards

Posted by Tyler Kretzschmar
Tyler Kretzschmar
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on Monday, 22 April 2013
in Business in China

The global financial crisis and the fast growing Chinese consumer market, as well as the abundant wealth available for investment in China today, amplify the growing need to penetrate and operate in the Chinese market. It is no secret that China offers numerous opportunities to expand a business; however what remains a mystery for many small and medium sized enterprises (SMEs) is how to effectively address the challenges of entering and operating in China.

One such challenge is the growing market itself, giving way to an increasing number of competitive local companies. The 12th Five Year Plan that laid the roadmap for China’s social and economic development for 2011-2015 shifted the focus of the Chinese policy makers to the strengthening of China’s dynamic new homegrown companies, referred to in China as Domestic Private Enterprises (DPE), both home and abroad. In 2010, 60 percent of China’s GDP came from DPEs – this is in striking contrast to the 38 percent they contributed in 2005. The fact that GDP is expected to quadruple itself between 2007-2025 also gives perspective into the business threats facing foreign companies in China and in home markets in the next few years.

Furthermore, the 12th Five Year Plan’s goal to increase the overall quality of life for Chinese citizens is creating higher operating costs in some sectors. One example is minimum wage increases (up to 13 percent each year), translating into more costly production in many of the developed manufacturing hubs along the coast. Another is China’s goal of a 40 percent reduction in carbon-dioxide emissions per unit of GDP by 2020, constituting elevated environmental taxes for manufacturers. 

Dutch Trade Delegation's visit to Changzhou and Jintan Economic Development Zones, a great Success!

Posted by Administrator
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on Tuesday, 13 November 2012
in Business in China

The branch associations FME-CMW and GMV China, organized a Dutch Trade Mission to Shanghai and Beijing, China from the 4th to 9th of November. The Mission was aimed at operations and export managers from companies that want to make the step in search of setting-up production and sales in China. The delegation consisted of companies that focus on two of nine key business sectors; Agro-food and High-Tech Manufacturing, sectors in which the Dutch government had implemented international economic policies over the past few years.

During their visit to Changzhou, the participants visited the Changzhou Industrial Incubation Initiative (CI3). This is a 13,000 square meter area that consists of manufacturing and office space, in the Wujin Economic Zone (WEZ), Jiangsu province. There, companies are able to create a cost-effective establishment that includes the development of their own production and sales facilities in China. 

In the morning, Zvi Shalgo (CEO, PTL Group) gave a presentation about the opportunities for Dutch SMEs in the Chinese market, and the challenges in managing production and distribution channels in China. Afterwards, the participants went for a guided tour within the CI3 compound.

For lunch there was a meeting hosted in the presence of Yao Xiaodong, Mayor of Changzhou (a city with approximately 4.6 million citizens), and the visit to Jintan was officially opened. To create a better understanding of the companies that are operational in the Jintan area, the delegation then visited several companies operating in various industries. After the company visits, presentations were given by Roeland Schuurman, Representative Officer of the Netherlands Business Support Office in Nanjing (NBSO), Zvi Shalgo and Ding Rongyu, Mayor of Jintan.

The day ended with a diner hosted by the government of Jintan, in the presence of all the Jintan government officials. The NBSO in Nanjing, representative of the province of North-Brabant of The Netherlands, and the vice-consul of the Consulate of the Netherlands in Shanghai were also present at this official event. 

Overall, this was a mutually beneficial event and a big success for Dutch companies willing to learn about doing business in Jintan area and China, and to be able to establish high-level connections with the local government. It also strengthened the healthy economic relationship between China and the Netherlands. PTL Group would therefore like to thank the Jintan Government and all other partnerships involved for their efforts making this day a success.  

Posted by Zvi Shalgo
Zvi Shalgo
Zvi Shalgo is the CEO and owner of PTL Group. He is also a Chairman of the Israeli Chamber of Commerce in Shan...
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on Monday, 23 April 2012
in Business in China

While China is on an accelerated path to become a consumer oriented market international companies face ever growing managerial challenges trying to keep up. Over two decades of attracting massive foreign investment and the creation of fast technology transfer mechanisms made China the world’s main manufacturing base. 2011 and the new 12th five year plan shifted the focus of the Chinese policy makers to the strengthening of China’s dynamic new homegrown companies both home and abroad. Domestic Private Enterprises (DPE) as they are called here contributed over 60% of the Chinese GDP in 2010. This is in striking contrast to 38% they contributed back in 2005. Adding to this the fact that the Chinese GDP is expected to quadruple itself (2007-2025) helps to draw a general perspective of the business threats and challenges facing Western companies in China as well as in home markets in the next few years.

The financial crisis since 2008 from one side, and the fast growing Chinese consumer market as well as the abundant wealth available for investment in China today, amplify even more the growing need to penetrate and operate in Chinese markets.

Turnaround & Transformation Triggers

China is well known for being a challenging management environment for foreign companies. There are many cultural and structural market reasons that create those unique difficulties. As the new year of the dragon begins it will be interesting to focus on two recent trends affecting manufacturing small and medium sized enterprises (SME). These are both good reasons for many European based companies to reconsider their approach towards opening a new operation in China; globalisation of supply chains and the increased threat of competition by Chinese DPE in China and within a few short years in Europe’s own backyard.